Odato: Private funds pay AG's bills

Published 10:10 pm, Sunday, May 5, 2013

FILE - In this Oct. 2, 2012 file photo, New York Attorney General Eric Schneiderman discusses a lawsuit against JPMorgan Chase involving residential mortgage-backed securities during a news conference at the Justice Department in Washington. While Schneiderman's lawsuit alleges massive fraud by Bear Stearns, the investment bank JPMorgan bought in 2008, he's not criminally prosecuting anyone because the felony statute of limitations has passed. (AP Photo/Carolyn Kaster, File) less

FILE - In this Oct. 2, 2012 file photo, New York Attorney General Eric Schneiderman discusses a lawsuit against JPMorgan Chase involving residential mortgage-backed securities during a news conference at the ... more

Photo: Carolyn Kaster

Odato: Private funds pay AG's bills

1 / 1

Back to Gallery

Whether retired racehorses are being mistreated because of mismanagement and incompetence at a Saratoga Springs-based equine rescue group is a question before a state court in Manhattan. But the approach to proving that case against the Thoroughbred Retirement Foundation by Attorney General Eric Schneiderman appears to be unique as the AG lets third-party adversaries of the defendants pay the AG's bills of evidence collectors and expert witnesses.

Exhibits attached to a motion seeking to compel Schneiderman to turn over records in the lawsuit show that the AG entered into an unprecedented arrangement with executors of the estate of Paul Mellon to pay the costs of veterinarians, and their assistants, who are getting $1,500 a day to check out the 1,000-head herd and $150 an hour to consult and prepare reports. The Mellon executors, Beverly Carter and Frederick "Ted" Terry Jr., complained to the AG to do something about the board of the foundation.

A year ago, Schneiderman sued to remove the board, drawing a sharp response from the TRF's directors, who alleged from the outset that he was pursuing an inappropriate prosecution. Schneiderman's action followed a story in the New York Times about the TRF headlined "Ex-Racehorses Starve as Charity Fails in Mission to Care for Them."

More Information

Do you have a story about waste and abuse of public funds? Contact James M. Odato at 518-454-5083, jodato@timesunion.com or on Twitter at @JamesMOdato

The foundation's leaders are implying that a cozy relationship was built between the AG and the executors, who have been trying to control the board for years. Lawyers for the TRF, including New York Racing Association trustee Barry Ostrager, charge in court papers that the AG entered into a "highly unorthodox and possibly unethical arrangement" with the executors.

The AG's deal to allow a third-party to pick up some of its investigative expenses is unlike anything done before, according to some lawyers who have worked in the office, and is probably ill-advised.

"I have never heard of such an arrangement before — never," said William Josephson, who from 1999 to 2004 headed the charities bureau, the unit that is behind the TRF suit. Josephson said he never even thought of the idea of using a complaining party's money for a case.

"It's foreign to me — a concept whereby outside interests are providing financial resources to assist in an investigation?" said former Attorney General Dennis Vacco. "I think that's a slippery slope."

One former senior attorney in the AG's office, who said he isn't authorized to speak publicly, added there doesn't appear to be anything wrong with doing such a thing, but it undermines the credibility of the expert witnesses' work.

In a response to the foundation's motion, the AG said the defendants make the false claim that the executors are directing the suit and "pepper their reply papers with vague and inflammatory allusions to serious questions about the independence and professionalism of the NYAG's office" and a "possibly unethical arrangement."' The motion, they say, is part of the foundation's continuing a strategy of attacking the prosecutors.

"We're not attacking," said John Moore, head of the foundation's board. "We're counterattacking." He said Carter and Terry previously controlled the board, including when the herd was much bigger than its current size, and want to regain control.

The pair are trying to use the power of the AG to starve out the board, he said. Fund-raising and managing the herd has become an even greater challenge since the suit was lodged, Moore said.

The Mellon funds come from the estate of Paul Mellon, a horse owner. Executors, according to his wishes, donated $7 million to the TRF, the biggest and oldest horse retirement organization nationwide. Another $1.4 million has also been provided to help the group, said Terry. He said the executors agreed to pay the charges for the AG's experts, but the AG picked the vets to use and their work product is kept from the executors.

His law colleague Robert Giuffra said the executors were petitioning the government for redress and the AG asked the executors to pay for the veterinarians. "All we basically have done is provide the funds to allow independent vets to examine the health of the horses on these farms," he said.

Terry said the executors want the board ousted because animals' are not getting the care they deserve. He said the executors turned to the AG instead of suing themselves because of the "range of authority" in the public office.

Damien LaVera, a spokesman for Schneiderman, would not say why the office didn't use its own funds to develop the case. He called the issue a pointless distraction.